Back in the industry's early days, most firms in the space invested primarily with an eye on startups and tech that were directly related to their parent company's core products. Yet recent years have seen more and more CVCs looking for winners of any kind, behaving more like traditional venture firms. And as CVCs have broadened their scope, more corporations have begun to create early-stage investing outfits of their own.
A recent PitchBook analyst note dives into much further detail on those trends and several others shaping the current state of CVC in the US. It also includes a look at the three most active CVC firms, all of which are affiliates of some of the biggest names in tech.
Using data and analysis straight from the note, here's a summary of those three CVC powerhouses, diving into their recent dealmaking, their differentiating factors, their relationships to their parent companies and more:
Intel CapitalWith nearly 1,800 investments recorded on the PitchBook Platform since its founding in 1991, Intel Capital is one of the oldest and busiest firms on the CVC circuit. It was originally created to invest in startups that might later become buyers of Intel's semiconductor products, but has diversified in recent years, operating in an array of tech sub-sectors including AI, cybersecurity and 5G. And instead of simply trying to drive new business to its parent company, Intel Capital now targets "venture-style returns," per our analyst note, and the firm's staff is compensated based on financial performance.
In some ways, though, Intel Capital is still fulfilling its original corporate mission. Former Intel Capital portfolio companies have made up 15.5% of all Intel acquisitions since the start of 2008, including businesses in the VR and wearables spaces.
Deals involving CVCs generally come at higher valuations than non-CVC investments, but Intel Capital takes it to the extreme. In 2018, the firm's early-stage deals came at a median pre-money valuation of $34.5 million, while its late-stage deals reached a $125 million median, per PitchBook data. (Not all of Intel Capital's deals have been disclosed to PitchBook). Intel Capital is also more active than most VCs in terms of leading rounds: While CVCs led or were the sole investors in just 23.1% of all total investments in the US in 2018, Intel led or was the lone participant in 36.7% of its deals, down from more than 40% in 2017.
GVIntel was one of the original California tech giants, so it makes sense the company's venture arm was also a pioneer of the CVC space. And since Google has emerged in the past decade as a new industry colossus, it also makes sense that the company's CVC unit has developed into a power in its own right. GV has surpassed Intel Capital as the most active investor in the space, including 82 deals last year that combined to be worth more than $5 billion.
Unlike a vast majority of its peers—and despite the fact it relies in part on Google data to make investments decisions—GV claims to be purely financially motivated, with no mandate to invest in startups with direct applications to Alphabet and Google's other operations. It invests across a wide span of sectors, with healthcare, life sciences and AI the only verticals that represent more than 10% of its portfolio over the past decade.
While Google's $3.2 billion purchase of Nest in 2014 is one of the more notable recent examples of a corporation acquiring a startup that its CVC arm had previously backed, the deal was something of an outlier. Dating back to the start of 2012, just 5.7% of all Google takeover targets had been previously backed by GV, compared with a 15.5% rate for Intel and Intel Capital over the past 10 years.
Salesforce VenturesSalesforce Ventures differs from the other names on this list in multiple major ways, including fewer resources to work with (it claims AUM of just $600 million) and the fact it still prioritizes investing in startups that could directly benefit its parent company over the pursuit of profits. But it's just as active as its peers, completing 60 investments during 2018.
Salesforce Ventures invests mainly in Series A and Series B rounds, yet it rarely leads those deals, doing so less than 10% of the time during 2018. That's quite different from Intel Capital, for instance. But Salesforce Ventures' early- and late-stage valuations tend to be even higher than Intel Capital's, with a median pre-money valuation for last year's early-stage investments of $40 million, and a median of $142.5 million for late-stage deals.
The firm is also outpacing its peers in two other key areas. For its portfolio comanies first funded between 2009 and 2013, Salesforce Ventures achieved exits at or above the prior post-money valuation for 37% of its portfolio companies, compared with 21.8% at GV and 18.8% at Intel Capital. And over that same span, just 7.4% of its portfolio companies went bankrupt or out of business, besting rates of 12.9% at GV and 14.5% at Intel Capital.
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Want more on all things CVC? Read our recent analyst note.